The federal government will refund nearly 500,000 robodebts worth more than $700 million after admitting significant elements of the scheme were unlawful.
In a taking out the trash announcement on Friday afternoon, Government Services Minister Stuart Robert announced that 470,000 debts raised through the controversial robodebt scheme would be refunded, worth $721 million.
These debts were raised wholly or partially using average ATO income data, a method that has proved to be significantly flawed, severely impacting vulnerable members of the community.
“From July this year, Services Australia will refund all repayments made on debts raised wholly or partially using income averaging of ATO data. Refunds will also be made for any interest changes and / or recovery fees paid on related debts,” Mr Robert said in the media release.
“Services Australia will now put in place the mechanisms needed to start making refunds, including how affected customers are advised of next steps. Consultation will occur with stakeholders, including the Commonwealth Ombudsman, and clear communication is a priority, so people understand what it means for them.”
It comes as the robodebt scheme faces a number of legal challenges and a class action lawsuit.
In November last year the government walked back on some of the major elements of the scheme, announcing debts would no longer be raised based solely on the ATO data. Using this method, the onus was then placed on the welfare recipient to explain why the discrepancy existed.
Under the new program, Centrelink staff will investigate the discrepancy first before a debt notice is issued.
The Online Compliance Intervention scheme, dubbed robodebt, was launched in July 2016. It uses an algorithm to average out a welfare recipient’s yearly income using data supplied by the ATO, crossmatched with income reported to Centrelink.
If a discrepancy was identified between these two datasets, a please explain message was automatically sent to the individual.
But the program was found to regularly miscalculate debts and generate letters based on incorrect or non-existent debts. It also placed the responsibility on a welfare recipient to prove a debt didn’t exist, rather than relying on Centrelink staff.
The scheme is still facing a class action lawsuit backed by Gordon Legal. It is understood the decision will be made on whether to scrap the scheme entirely as part of the federal budget, which will now be delivered in October.
The government will continue to seek to recover apparent debts through the new method, Mr Robert said.
“It is important to note all other income compliance debts will continue to be subject to recovery, ensuring the integrity of Australia’s welfare system,” he said.